Union Oil Co. v. Reconstruction Oil Co.

Plaintiff, as lessee of certain land under an oil and gas lease in the Signal Hill Field, instituted this action on July 13, 1934, to enjoin defendants from continuing the drilling of an oil well known as Hines No. 1 well which was alleged to have been located approximately 60 feet west from the southwest corner of plaintiff’s lease and which in the process of drilling deviated from the vertical and entered and trespassed upon plaintiff’s lease. Plaintiff’s lessors were permitted to intervene in the action and complaints in intervention were filed by them whereby substantially the same relief as that sought by plaintiff’s complaint was prayed. On August 22, 1934, plaintiff filed with the court wherein the action was pending a petition for permission to conduct a subsurface survey of Hines No. 1 well for the purpose of ascertaining the precise location and course of said well. The petition was granted over the objection of defendants by entry of an order for such survey on August 27, 1934. An appeal from this order was promptly taken by defendants on the date of the issuance of the order. An attempt to conduct a subsurface survey of the well was made on August 28, 1934, but was unsuccessful because of the refusal of those defendants who then had charge of the drilling of the well to permit such survey to be made. On August 30, 1934, on application of the plaintiff, the trial court made an order directing the defendants to show cause on September 7, 1934, why they should not be restrained and enjoined from bringing the well to production or completing the drilling thereof pending trial of the action and further ordering that, pending the hearing of the order to show cause, defendants be restrained and en

Before giving consideration to the contentions advanced in support of the appeal herein it will be proper to mention certain facts which relate to the history of the Hines No. 1 well that were developed during the trial of the action. The drilling of this well was commenced during the month of March, 1934, by the defendant, Marine Development Corporation, which was the lessee of the land whereon the well was located.

In the meantime drilling operations which, as above stated, were begun during the month of March, 1934, by the Marine defendants were being continued. At an early stage in these operations Mayhew and Campbell suspected that the well was

On March 23, 1934, the plaintiff addressed a letter to the Marine Development Corporation stating that plaintiff was informed that the Marine Corporation was drilling an oil well which was located a short distance from the outer boundary line of plaintiff’s lease. It was observed that the science of drilling for oil had reached a stage where the making of a hole might be so controlled and directed that the well could be completed under lands that were somewhat distant from the original location of the well. Warning was given that, in view of the location of Hines No. 1 well, the Marine Corporation must not permit its well in the process of drilling to come within the boundary line of plaintiff’s lease or to produce oil or gas from the land leased by plaintiff and demand was made that the Marine Corporation should take all necessary steps to prevent such trespass or the conversion of oil or gas. Copies of this communication were served on E. D. Marr, as president of the Marine Corporation and on D. L. Mayhew as vice-president of said corporation. On April 17, 1934, a conference was held in the city of Los Angeles between the defendants Marr, Evans and Rose and certain persons representing the plaintiff. The evidence relating to statements that were then made by certain of the above-mentioned defendants respecting the location at that time of Hines No. 1 well was conflicting but evidence was produced which indicated that the defendant Marr then stated that the Marine defendants had expended considerable time and money and had experimented with various types of tools in an effort to remove the well from the plaintiff’s property but that up to

The Marine defendants continued to drill the well until May 4, 1934. Prior to this date the well had been drilled to a depth of 3,995 feet at which time a cement plug was placed in the hole. On June 18, 1934; the Reconstruction Oil Company was incorporated in the state of Nevada for the purpose of taking over the well and completing the drilling of it. The defendant Paul Newby became president and the defendant Nathan Newby, Jr., secretary of this corporation. On June 18, 1934, the Reconstruction Corporation entered into a written contract with the Marine Corporation whereby the latter agreed to assign its leasehold interest in the land whereon the well was located to the former and the Reconstruction Company agreed to continue drilling the well and to use its best efforts to place it on production. In accordance with this contract the Reconstruction Corporation entered into possession of the premises and assumed control of the well on June 18, 1934. On this same date the Reconstruction Oil Company entered into a contract with the defendant Felix Gillespie whereby the company agreed to place Gillespie in possession of the well for the purpose of “drilling and placing the same on production” and that it would furnish to Gillespie all necessary tools and machinery to drill the well t.o an approximate depth of 5,100 feet and that it would pay him $200 per day for every day that he remained in possession of the well and continued drilling operations. Of the specified daily amount thus agreed to be paid to Gillespie it was provided that $50 should be paid in cash and the remaining $150 should be paid “out of 15% of the oil produced and saved from said well”. Gillespie agreed to furnish all necessary labor and mechanical skill required in drilling the well and placing it on production. Gillespie thereupon assumed control of the drilling of the well and continued in charge of such operations until the well was placed on production. The defendants Paul D. Newby, Nathan Newby, Jr., and Felix Gillespie are referred to in the findings as the Reconstruction defendants and will herein

On July 7, 1934, a letter was sent by plaintiff’s counsel to the Reconstruction Oil Company warning said company that, in the drilling operations being carried on at Hines No. 1 well by this company, it must not cause or permit the well to trespass on plaintiff’s lease or to produce oil or gas therefrom. On July 10,1934, the attorneys for the Reconstruction Corporation replied to the above-mentioned letter assuring the plaintiff and its counsel that it was not the intention of the Reconstruction Corporation to infringe upon plaintiff’s legal rights. On July 11, 1934, plaintiff’s attorneys addressed a reply to the last-mentioned communication suggesting that the course and direction of Hines No. 1 well should be ascertained by subsurface survey which might be accomplished by some mutually acceptable surveyor and expressing willingness to apportion fairly the cost of such survey between plaintiff and the Reconstruction Corporation. Additional correspondence between the attorneys for plaintiff and the Reconstruction Company resulted in a declination by the company to permit the survey to be made. After the commencement of this action the orders providing for subsurface surveys to which reference has heretofore been made were procured from the court wherein the suit was pending. Appeals taken from these orders were dismissed by the Supreme Court on October 30, 1935, on the express ground that said orders were not appealable orders. (Union Oil Co. v. Reconstruction Oil Co., 4 Cal. (2d) 541 [ 51 Pac. (2d) 81 ].)

The results of the survey which was made during the month of November, 1934, by Alexander Anderson, Inc., were received in evidence over the objections of the defendants. These results which obviously constituted evidence most important to plaintiff’s case indicated that all of Hines No. 1 well below a depth of 1700 feet was wholly upon and within the property covered by plaintiff’s lease.

The first contention advanced by appellants on this appeal is that there was a serious and fatal irregularity which occurred during the trial of the action which requires reversal of the judgment. This irregularity consists in the fact that after the trial of the suit which was instituted in Los Angeles County and was being heard in a department of the superior court of that county in the city of Long Beach

Appellants now argue that the court had no jurisdiction to hold a session in Orange County and that the fact that it permitted each of the six witnesses who testified in Fullerton to be sworn by a deputy clerk of Los Angeles County who had no authority to administer an oath outside the county of Los Angeles renders void the entire judgment which is based in part on evidence which it is claimed was thus erroneously received.

It is our opinion that the question thus presented is not a question of jurisdiction. There is no suggestion that the trial court lacked jurisdiction to hear and determine the cause. It is apparently appellants’ contention that when the court left the territorial boundaries of Los Angeles County and received the testimony of certain witnesses in another county, it lost the jurisdiction which it admittedly possessed so long as it remained in Los Angeles County and that it had no power to receive evidence in Orange County and the evidence thus

The point thus raised is novel and no authority which directly bears upon the question is cited. The nearest factual approach to the situation here presented appears in the case of People v. Pompa, 192 Cal. 412 [ 221 Pac. 198 ]. It appears that during the trial of this case wherein the defendant was charged with the commission of first degree murder and was convicted the district attorney moved that the jury be taken to view the premises where the crime was committed. No objection to this procedure was then offered by the defendant. The court thereupon ordered that the jury be taken to view the scene of the crime and remarked that no argument would be permitted during the visit and that no testimony would there be taken. However, during the view of the premises, the individual whom the court had appointed to show the premises was directed by the court to point out and designate various parts of the premises. This he did and in so doing he was asked questions both by the judge and by certain jurors. To the questions thus asked and the precedure thus followed no objection was interposed. It was, however, later during the trial particularly objected that testimony had been received during the view of the premises. The objection was overruled. After a verdict of conviction was returned the defendant moved for a new trial and thereupon renewed his objection theretofore presented. The motion for a new trial being denied the defendant appealed and on appeal insisted that the taking of testimony during the view was prejudicially erroneous and ground for reversal. The contention did not prevail for two reasons. The first reason was that it appeared that during all proceedings attending the view of the premises the court in its completeness was present, the only element absent being the walls and furnishings of the courtroom where the court usually convened. It was remarked “that there is no special sacredness in the atmosphere of a courthouse or the walls or furnishings of a courtroom which requires that sessions of the court shall be held there and not elsewhere, if otherwise the forms of law governing the trial of causes are observed ...” The second reason given for refusing to sustain the defendant’s contention was that the defendant, by his failure to present timely objection to the taking of testimony

It is our conclusion that the acquiescence of appellants and their counsel in the alleged irregularities of which they complain and their concurrence in the commission of such irregularities preclude them from now insisting upon these irregularities as a ground for reversal of the judgment. Appellants had ample opportunity to present timely objection to the court’s visit to the Anderson plant in Fullerton. Not only did they make no objection thereto but their counsel expressly stated, when the visit was first proposed, that he would not raise the objection that the court would be going into another county. Furthermore, it is not denied that the legal representative of appellants was present in Fullerton at the time appointed and not only made no objection to the proceedings that were there taken but specifically stipulated that the court had met in Fullerton and that the testimony of different witnesses who were employed in the Anderson plant should be heard. There was then much more than passive acquiescence by counsel for appellants in the irregularities of which he now complains. There was active participation in such alleged irregularities. This acquiescence and concurrence in such claimed irregularities, in our opinion, constitute a waiver of the right now to raise objection to them. It may further be observed with respect to the evidence which was received in Fullerton that it stands uncontradicted and, so far as appears, no prejudice resulted to appellants from its reception.

The second contention advanced by appellants is that the judgment, in so far as it awards money damages to respondent, is void for the reason that the original complaint filed in the action demanded merely injunctive relief and no supplemental pleading was ever filed which demanded compensation by way of damages. It is urged, therefore, that the trial court was precluded from granting relief outside of the issues framed by the pleadings and that the award of damages was entirely unauthorized and beyond the court’s power. The basis for this contention is that a purely equitable action does not warrant a court in granting relief which is strictly legal in character particularly when such relief is entirely outside the issues made by the pleadings. Concededly, this action whereby respondent sought only the issuance of an in

In giving consideration to the contention it may first properly be observed that at the time the action was instituted respondent had no cause of action for damages. The well had not then been placed on production and respondent had suffered no actual damage. The only relief for which respondent could then properly pray was that appellants should be restrained from causing damage in the future. This situation continued to exist until the well was placed on production during the pendency of the action. When the well began to produce oil on August 30, 1934, then for the first time a cause of action for damages accrued and admittedly at any time thereafter respondent might properly have brought an action for legal relief by way of damages. However, it is a familiar principle of equitable procedure that equity having once acquired jurisdiction of the subject matter of an action will retain it to the end that a complete adjudication of all conflicting rights may be had and a final determination of all matters in controversy may be accomplished. The damage suffered by respondent occurred after the suit for injunctive relief had been filed and was a matter which grew out of the situation portrayed by the allegations of respondent’s complaint. It was therefore purely incidental to the relief which respondent originally sought by its equitable action and a court of equity having properly acquired jurisdiction was justified in retaining it until all issues in the action should be determined. (McLaughlin v. Del Re, 64 Cal. 472 [ 2 Pac. 244 ] ; McCarthy v. Gaston Ridge Mill etc. Co., 144 Cal. 542 [ 78 Pac. 7 ].)

With respect to the contention that the award of damages included in the decree is outside any of the issues presented by the pleadings and that therefore the court lacked the power to make the award, it may be observed that a supplemental pleading might have been filed after the evidence produced during the trial of the action had disclosed what amount of damage respondent had suffered. (McCarthy v. Gaston Ridge Mill etc. Co., supra.) However, it must be borne in mind that we are here considering an action in equity where the relief administered is such as the nature of the case and the facts as they exist at the termination of the suit demand. In such a situation a sup|)lemental complaint is not

The third contention advanced by appellants also relates to the award of damages. It is pointed out that in making the award the trial court allowed the gross amount received by the appellant, Reconstruction Oil Company, from its sale of oil and gas produced by the well without permitting any deduction for cost of production. It is declared that this procedure amounted to an assessment of punitive damages in an equitable action which is contrary to equitable principles and that such action constituted reversible error.

While it is true that this action as originally instituted was strictly equitable, the award of damages incidental to the equitable remedy of injunction was a legal remedy and legal rules appropriate to the measurement of damages were applicable to this phase of the ease. It is apparent that appellants fully appreciate that the award of damages was a remedy of legal rather than equitable cognizance for they demanded that a jury be empaneled to try this issue and the trial court’s refusal of such demand is also urged as error requiring reversal of the judgment.

Since the award of damages was a legal remedy and the rules of law relating to the admeasurement of damages were proper to be applied it may be inquired what was the legal cause of action which rendered the assessment of damages appropriate. It is obvious that this cause of action was trespass. Respondent maintained that appellants by means of Hines No. 1 well had encroached upon respondent’s property and that when this well was placed on production the oil and

In Lightner Min. Co. v. Lane, 161 Cal. 689 [ 120 Pac. 771 , Ann. Cas. 1913C, 1093], which was an action at law by the owner of a mine against the owners of an adjoining mine to recover the value of certain ore alleged to have been extracted by the defendants from the plaintiff’s property it was declared that if the invasion of plaintiff’s mine by defendants was the result of honest mistake and inadvertence the measure of damages would be the value of the mineral extracted from the ore less the cost of mining and milling but, if the trespass was intentional and with knowledge of plaintiff’s rights, defendants would be chargeable with the value of the mineral after reduction without any deduction for expenses of mining and milling. That this is the general rule is indicated by the text of section 13 of the article on oil and gas appearing in 8 California Jurisprudence Supplement, at page 610. It is true that it is stated in Lightner Min. Co. v. Lane, supra, that the award of the gross value of mineral taken by a wilful trespasser without deduction for expenses of mining and milling amounts to an assessment of punitive damages and it may be conceded that as a general rule equity does not award damages by way of punishment. (United States v. Bernard, 202 Fed. 728 , 732.) Nevertheless, it must be observed that in California there is but one form of action (sec. 307, Code Civ. Proc.), and that although this action as originally instituted was purely equitable in nature the claim for damages which arose during the trial and which came into existence through the persistent efforts of the Reconstruction defend

The fourth contention of appellants is that the money judgment rendered against the individual appellants, Nathan Newby, Jr., Paul D. Newby, and Felix Gillespie, is erroneous. The basis for this contention is that since respondent elected to bring an action in equity and to seek relief based on equitable principles it waived the tort and was not entitled to recover damages from the above-mentioned individuals on the theory that these persons were jointly responsible with the Reconstruction Oil Company for the commission of a tort. It is maintained that in an equitable action the basis for recovery of a money judgment is predicated exclusively on the doctrine of unjust enrichment. It is further declared that, although the trial court expressly found that the Reconstruction defendants, which coneededly embraces the above-mentioned individuals as well as the corporation, received the sum of money awarded to respondent as damages, which finding would appear to render irrelevant the contention here advanced, nevertheless this finding is entirely lacking in evidentiary support and must be disregarded.

Assuming that appellants are correct in their statement that the trial court’s finding is unsupported by evidence and must therefore be disregarded we are nevertheless not impressed by the contention that the money judgment rendered against the above-named individual defendants is erroneous. Examination of the transcript impels the conclusion that the portion of the judgment which provides for the recovery of a specified sum of money from the Reconstruction defendants amounts to an award of damages in respondent’s favor and that the award was made to compensate respondent for the damage which it suffered as a result of an intentional and deliberate trespass committed by the above-named individuals. We have heretofore expressed the opinion that the finding that an intentional trespass was committed is supported by the evidence. It is also our opinion that the evidence was ample to demonstrate that the three individuals were re

The fifth contention advanced by appellants is that the trial court erroneously refused their demand for a jury to try the issue of damages. Since, as above noted, it is our opinion that the rendition of a money judgment against the Reconstruction defendants amounted to an award of damages and was therefore a remedy legal in character it is apparent that this contention merits serious consideration. Proper examination of it requires some mention of the factual background against which this problem is projected.

Inspection of the record shows that at various times during the trial of the action respondent demanded that the Reconstruction defendants produce records in their possession which would show the amount of money actually received from the sale of oil and gas recovered by the well. It was agreed that such records would be produced. Finally, on Febuary 5, 1935, after the trial had proceeded for approximately three weeks, respondent called appellant, Nathan Newby, Jr., as a witness for the purpose of proving by him the amount received. During the examination of this witness it appeared that appellants had produced records which showed the amount received from oil and gas sales up to the first part of January, 1935, but that such records were incomplete in that they did not show what amount had been received during the month of January, 1935. Respondent insisted that it was entitled to complete records which would include a report of sales made during the aforesaid month and counsel for appellants, al

It is our conclusion that upon the facts and circumstances of this case as they are disclosed by the record herein appellants were not entitled as a matter of right to a trial by jury of the issue of damages. The action as it was originally instituted was purely equitable in character and the relief which was sought was strictly equitable. Respondent’s claim for damages arose after the suit was brought and came into existence as a result of the persistent and determined efforts of the Reconstruction defendants to complete the drilling of the well to the point of production and to continue the production of oil and gas from the well during the pendency of the action. That the trial court was fully justified from the evidence in finding that these appellants were deliberate "and intentional trespassers on respondent’s property and that the proper measure was applied to the question of damages are matters which, in our opinion, may not be successfully disputed.

It is a settled principle of equity that the right to have an issue of fact tried by a jury does not exist in causes which are purely equitable in character. (Koppikus v. State Capitol Commrs. 16 Cal. 248 ; Cassidy v. Sullivan, 64 Cal. 266 [ 28 Pac. 234 ] ; McLaughlin v. Del Re, supra; Pacific Ry. Co. v. Wade, 91 Cal. 449 [ 27 Pac. 768 , 25 Am. St. Rep. 201 , 13 L. R. A. 754 ] ; Cauhape v. Security Sav. Bank, 127 Cal. 197 [ 59 Pac. 589 ] ; Matter of Coburn, 165 Cal. 202 , 219 [ 131 Pac. 352 ].) From this principle it follows that the granting or refusing of a demand for a jury trial as to some issue of fact in an action in equity is a matter which is confided to the trial court’s discretion and if a jury is allowed in such a case its verdict is merely advisory to the court. (La Societe Francaise v. Selheimer, 57 Cal. 623 ; Sweetser v. Dobbins, 65 Cal. 529 [ 4 Pac. 540 ] ; Curnow v. Blue Gravel etc.

The sixth contention presented on this appeal is that the trial court committed numerous errors in the reception of evidence produced by respondent and in its refusal to admit other evidence offered by appellants and that the errors thus committed are sufficiently serious to require reversal of the

The seventh contention advanced by appellants is that numerous designated findings and portions of findings made by the trial court are lacking in evidentiary support, that certain specified findings are inconsistent and that certain findings contain improper and unnecessary specifications. Analysis of the findings impels the conclusion that they are perhaps unnecessarily voluminous. We find no occasion, however, for indulging in an extended discussion of them since an examination of the entire record warrants the opinion that the trial court was amply justified from the evidence which was placed before it and from inferences fairly deducible from the evidence in finding that the Reconstruction defendants were guilty of an intentional, wilful, and deliberate trespass upon respondent’s property. The decree granting an injunction against the continuance of such trespass and awarding damages as incidental relief to the equitable remedy of injunction was therefore proper and may not be successfully attacked on appeal.

It may not be out of place to observe that very considerable effort has been expended on this appeal in attacking the results of the subsurface survey of Hines No. 1 well conducted by Alexander Anderson, Inc. Appellants’ endeavor in this regard is entirely comprehensible since the correctness of the subsurface survey was vital to respondent’s case. Unless it could be established to the satisfaction of the trial court that Hines No. 1 well had been so drilled that it penetrated the formation underlying the surface of respondent’s property respondent could not hope to be successful in this action. It is obvious, however, that the correctness of the results achieved by the Anderson survey was a question of fact to be determined by the trial tribunal. The mechanical apparatus used in making the survey and the methods employed in the mathe

The eighth and final contention presented on this appeal is that the trial court abused the eoncededly wide discretion with which it was invested -in refusing a motion for a new trial which was based in part on the ground of newly discovered evidence. The newly discovered evidence which was apparently the principal ground urged in support of the motion consisted of the affidavits of three persons to the effect that after subsurface surveys of Hines No. 1 well had been completed and after the trial of the instant action and after respondent had been informed by the results of the surveys and by the evidence produced during the trial of the alleged subsurface location of Hines No. 1 well respondent drilled a well on its property with the purpose of intersecting and destroying Hines No. 1 well but that nevertheless neither the amount of production nor the gravity of the oil produced by Hines No. 1 well was affected in the slightest degree by the drilling of the additional well by respondent. The announced inference which it is declared the trial court should have drawn from the above-described evidence was that the subsurface survey conducted by Alexander Anderson, Inc., was inaccurate and the results claimed to have been produced thereby were incorrect. It appears, however, that counteraffidavits in opposition to the affidavits filed by appellants in support of the motion were produced by respondent and that thereby a serious conflict in the evidence was presented. Under these circumstances the trial court’s order denying the motion for a new trial may not be disturbed. (Kataoka v. Han

Por the reasons stated herein the judgment from which this appeal has been taken is affirmed.

Barnard, P. J., and Marks, J., concurred.

A petition by appellants to have the cause heard in the Supreme Court, after judgment in the District Court of Appeal, was denied by the Supreme Court on May 27, 1937.